Investing - Theory, News & General • How and why do bond fund prices fluctuate?

Not prognosticating in any way, but assuming it’s not already built into current prices, how would you expect different bond funds (short, intermediate, long term, as well as junk vs government, etc) to change in price if the Fed starts cutting rates throughout 2024? What would be expected if rates slightly increased or remained constant ?

The way I think of bonds in a speculative manner is that the market tries to anticipate most likely outcomes. I think the market was rather slow to react in late 2021 and early 2022, but of course prior public policy had somewhat encouraged such a position. Of course people learn, so future reactions might be quicker. Rate increases in 2022 were essentially market surprises, and beyond initial projections, in spite of the Fed mandate for price stability. At this point expectations are for a decrease in the Fed Funds Rate, so an increase or continuation of current short-term rates for longer might amount to market surprises. If short-term rates go higher or continue for longer than expected, then generally longer-term rates have less immediate value, along the lines of breakevens.
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Statistics: Posted by alluringreality — Sun Jan 28, 2024 9:33 am — Replies 6 — Views 448

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